Indian Hotels Says Asset-Light Model Will Deliver Despite Q1 Blip
First quarter was a blip, says Indian Hotels.
The Indian Hotels Company Ltd.’s domestic growth slowed in the first quarter but it expects better earnings on the back of asset-light model of managing properties instead of acquiring or building them.
Revenue per available room fell 3 percent on a yearly basis in the April-June period due to the general election, the hospitality chain said in its exchange filing .
Still, the revenue growth guidance of 7 percent for financial year 2019-20 remains intact, according to Puneet Chhatwal, chief executive officer at the operator of Tata Group-owned Taj chain of hotels. Considering the June-July performance, he said, the company expects to meet the annual guidance either through revenue growth or cost optimisation.
“The growth was very slow in the months of April and May due to a once-in-a-five-year election impact,” Chhatwal said, adding that outlook for the second half of the year, which contributes nearly 65 percent to its revenue, is much better. The company, according to him, expects to benefit from renovated properties and an asset-light model based on management contracts.
Indian Hotels added seven contracts in the first quarter and is poised to sign 15 more this year, according to Motilal Oswal.
The hotels company also expects to raise its margin guidance by 3 percentage points to 28 percent, adjusting for the Ind AS 116 impact.
Chhatwal is not worried about slowing consumption in the economy. There will always be headwinds, he said. “Today, there is less consumption, tomorrow there will be something else. But the job of the management is to navigate the company through good and bad times,” he said. “We are confident that like in our preceding five quarters, we will continue to stay focused and drive our strategy.”
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